Heritage Gas gets green light for $14m Alton storage contract

Preparatory work on the Alton Natural Gas storage project is done in Fort Ellis, Colchester County, last year. The $130-million Alton project would use underground salt caverns, and Heritage Gas has been granted the right to use the first three caverns. (THE CHRONICLE HERALD / File)

Heritage Gas Ltd. has gotten the provincial regulator’s blessing for its plan to use a proposed natural gas storage facility near Stewiacke starting in four years’ time.

The Utility and Review Board ruled Thursday that the Dartmouth company can put the cost of its $14-million storage contract into rates. The plan will add about $2 per gigajoule to customers’ bills during winter months, starting in late 2019.

The project is being built by a sister company, Alton Natural Storage LP. Both firms are owned by AltaGas Ltd.

The 20-year agreement between them says the facility will be operational by April 1, 2019.

Heritage president Chris Smith said he was pleased the board agreed with the company that gas storage, available in other parts of North America, will mean cost savings for customers and improve security of supply.

“We’re looking forward to the next stage in the process with regards to Alton,” Smith said in an interview. “Hopefully, they can work through their process with the province and First Nations.”

The Heritage president referred questions on the project’s status to Alton officials.

Alton president David Birkett couldn’t be reached Wednesday afternoon for comment.

Construction work at the storage site near Alton has been on hold this spring while a three-month review of scientific data is done. The study is being commissioned by the Mi’kmaq Rights Initiative.

The province issued a partial work stoppage in late October after the Mi’kmaq community complained it had not been properly consulted about how treaty and fishing rights would be affected.

The project includes drawing water from the Shubenacadie River estuary near Fort Ellis and pumping it 12 kilometres to a site in Alton. From there, the water is sent down drilled wells to flush out 1.3 million cubic metres of salt from underground beds to create storage caverns.

The $130-million first phase of the project would see three caverns built, all of which would be used by Heritage.

While the contract approved by the board starts in April 2019, Smith said an interim agreement could be negotiated if the facility were available sooner.

The storage deal had called for the service to be available by April 1, 2018. But Heritage needed board approval by March 31 for that to happen.

The company filed its application with the regulator in December.

The project would allow Heritage to buy gas and store it at times when the price is lower. The fuel would be delivered to customers during peak heating season, when prices are higher.

Gas users would only pay the additional charge from Nov. 1 to April 30 each year.

“When we withdraw (gas), and start to use it to serve our customers, that’s when the customers would actually pay for it,” the Heritage president said.

Consultants working for the gas distributor have pegged the potential savings for customers at $13 million to $17 million annually, depending on market prices. But some energy experts have also said the benefit could be as little as $1.7 million per year if seasonal price volatility in New England were to disappear.

Heritage has the franchise to distribute natural gas by pipeline in the province. The Dartmouth firm provides gas to over 20,000 households and businesses in Nova Scotia.